ABA urges U.S. consumer bureau to exercise caution in regulating prepaid debit cards

By Guest Contributor
July 26, 2012

By Emmanuel Olaoye

WASHINGTON/NEW YORK, July 26 (Thomson Reuters Accelus) - The Consumer Financial Protection Bureau should expand the disclosure protections on debit and credit cards to general purpose reloadable prepaid cards, but it should provide flexibility on the disclosures that prepaid card issuers have to make to consumers, a major U.S. banking trade group said on Tuesday.

In a comment letter submitted yesterday, the American Bankers Association said that the general purpose reloadable, or GPR, prepaid cards should be given the same protections as prepaid cards such as gift cards, but the CFPB should recognize that there are a variety of GPR cards and that the market will continue to evolve. “The Bureau should ensure that GPR card disclosures are clear, easy to access and understand, but not adopt rules that effectively regulate the terms and conditions of the products, either directly or indirectly. Rather, the Bureau should allow consumers and the marketplace to determine features, pricing, and terms and not put artificial constraints that will cause market distortions and inefficiencies that simply increase prices,” the ABA said.

GPR prepaid cards allow consumers to load the cards with money upfront and use them like checking account debit cards.

The fast growing GPR prepaid market totals $57 billion and is expected to grow at a rate of 42 percent per year from 2010-2014, according to a study quoted by the CFPB.

In May, the CFPB issued a proposal that was seeking input on how to ensure that consumers’ funds on prepaid cards are safe and their fees were transparent.

Regulation E protects consumers who use debit cards and credit cards from unauthorized transfers from their accounts. It also requires the issuers to provide adequate disclosures of their fees to consumers.

Although some issuers of GPR prepaid cards voluntarily offer Regulation E protections to their customers, the bureau is considering whether to expand them to GPR prepaid cards. It is also concerned that the absence of an industry standard on fee disclosures make it difficult for consumers to comparison shop and make informed decisions about the cards.

The ABA said consumers should be left to determine the pricing and features on GPR prepaid cards.

“We stress that the market and consumers should determine GPR card features, pricing, and terms and that the Bureau should not directly or indirectly regulate their prices and features. The Bureau should also coordinate other consumer protection laws that might apply to GPR cards and rely on existing rules where appropriate to promote consistent, uniform disclosures and rules.”

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus. <a href=”http://accelus.thomsonreuters.com/solut ions/regulatory-intelligence/compliance- complete/” target=_new”>Compliance Complete</a> provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 230 regulators and exchanges.)

 

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